Intellectually speaking, we are value handicappers and if a market offers at least one value bet then we are prepared to trade it. However, psychologically speaking, we are session handicappers and we want to maximize our winnings at each session to minimize feelings of regret. These feelings can result from either getting ahead early and then losing later in the session or, alternatively, feeling that we are leaving money on the table because we quit the session too soon.
Bruss (2006) provides us with an approximation to an optimal stopping algorithm in these circumstances. For example, let us assume that we are trading multiple, sequential, sports markets on any given Sunday. We have completed seven markets of an eleven-market session and have accumulated two wins. Should we continue to the next market or stop for the day?
The decision formula is, as follows:
If (N – K) < ((K + 1 - G) / G)
Then "Stop"
Else "Continue"
In our example, with [N = 11, K = 7, and G = 2] the decision is to continue. But, if after the next market, we have not secured another win [N = 11, K = 8, and G = 2] then the decision is to stop!